Abstract

We examine the stock market reaction to natural and man-made disasters in potash mines. We use a sample of 44 mining accidents worldwide over the period 1995-2016. A quarter of the accidents were the result of a natural disaster, such as flooding, that often ended in the closure of the potash mine. The remaining accidents were caused mainly by human error, and almost 50% were work accidents often associated with serious injury or death. On average, mining firms experience a drop in their market value of 0.89% on the day of a disaster. However, we observe a significantly stronger response of the stock market to natural events. Indeed, the regression analysis confirms that the firm’s market loss is significantly related to the seriousness of the accident. On the other hand, we do not find any other micro- or macro-level factors that determine the stock market reaction following a disaster.

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